- Fall in oil prices and bullish sentiment over Dar's return drive appreciation
Pakistan's rupee continued its upward path against the US dollar for the third successive session on Tuesday, closing over 1.3% higher in the inter-bank market as former finance minister Ishaq Dar's arrival in Pakistan after five years in exile in London bolstered the money market's confidence.
As per the State Bank of Pakistan (SBP), the rupee closed at 233.91 after appreciating Rs3.11 or 1.33%.
On Monday, the rupee had made positive strides as well, closing at 237.02 after appreciating Rs2.63 or 1.11% in the inter-bank market as it factored in Dar's return.
Dar, who returned to the country on Monday, said he would take up the role of finance minister for the fourth time, adding that he wanted to get Pakistan out of its economic rut and stressing he wanted a strong and stable rupee.
“Prime Minister Shehbaz Sharif has asked me to accept the responsibilities of finance minister,” Dar said in a statement broadcast on state television on Monday evening. “By the grace of God, I will try my best to get Pakistan out of this economic rut.”
Dar is taking office with the challenge of getting the economy out of one of its worst balance of payment crises that has seen foreign reserves falling to a month of imports.
Reserves got a boost after the IMF board last month approved the seventh and eighth reviews of a bailout programme, allowing for a release of over $1.1 billion, but other inflows have not yet materialised.
Market experts attribute the recent gain of the rupee to bullish sentiments over Dar's return at the helm.
“There is a sentiment that Dar is known to keep the rupee in a narrow band, which was evident especially during his last stint as finance minister,” Wajid Rizvi, Head of Research at Intermarket Securities Limited, told Business Recorder.
“Oil prices have declined, which also provide a sort of saving grace for Pakistan. Furthermore, there is an extension in support from multilateral lenders in wake of floods.
“Moreover, improved sentiment also comes as Pakistan is seeking leniency in the IMF programme as well,” he added.
However, Dar will have little room this time around as compared to his previous stint, Rizvi said.
“Dar would rely on administrative measures, and is expected that policy implementation would be quicker as compared to during Miftah Ismail’s tenure,” he said.
Meanwhile, Zafar Paracha, General Secretary, Exchange Companies Association of Pakistan (ECAP), in a video message said the situation has changed significantly from what it used to be during Dar’s previous stint.
“Pakistan is under the IMF programme, the SBP is an autonomous body, and the government cannot purchase dollars from the market to meet its funding needs, leaving little space for the incoming finance minister,” he added.
Internationally, the dollar on Tuesday took a pause in what has been a relentless climb higher as the euro and even the besieged Japanese yen and British pound managed to recover a little ground, but medium-term fundamentals were still in the greenback’s favour.
The dollar index on Tuesday eased 0.1% to 113.8, after earlier touching 114.58, its strongest against a basket of peer currencies since May 2002.
Oil prices, a key determinant of currency parity, rose more than 1% on Tuesday, after plunging to nine-month lows a day earlier, amid indications that producer alliance OPEC+ may enact output cuts to avoid a further collapse in prices.
Inter-bank market rates for dollar on Tuesday
BID Rs 233.85
OFFER Rs 234.85
In the open market, the PKR gained 3.50 rupees for both buying and selling against USD, closing at 232 and 234, respectively.
Against Euro, the PKR gained 5 rupees for buying and 5.30 rupees for selling, closing at 224 and 226 respectively.
Against UAE Dirham, the PKR gained one rupee for both buying and selling, closing at 63 and 63.50, respectively.
Against Saudi Riyal, the PKR gained 1.20 rupees for buying and 1.30 rupees for selling, closing at 61 and 61.50, respectively.
Open-market rates for dollar on Tuesday
BID Rs 232
OFFER Rs 234